DOJ Opinion No. 100, s. 1985

DOJ OPINION NO. 100 , s. 1985 September 4, 1985 Mr. Victorino A. Basco Administrator, Maritime Industry Authority PPL Building, U.N. Avenue Metro Manila Sir : This refers to your request for opinion concerning the legal status of the Shipyard Development Fund (SDF) provided for in P.D. No. 666, the law "Providing for Incentives To The Shipbuilding And Ship Repair Industry". Particularly, your query is whether the SDF "constitutes a private fund of the registered shipyard so that the shipyard may keep the balance of SDF upon cessation of business, or a public fund which MARINA may have the discretion to order refund" in accordance with Rule X of the Revised Rules and Regulations to Implement P.D. No. 666. LLphil Quoted hereunder is the pertinent provision of Section 1 of P.D. No. 666 which provides for incentive benefits to shipbuilding and ship repair yards duly registered with the MARINA: "SEC. 1. xxx xxx xxx c) Exemption from contractor's percentage tax . The gross receipts derived by shipbuilders and ship repairers from shipbuilding and ship repairing activities shall be exempt from the contractor's tax provided in Section 91 of the National Internal Revenue Code during the first ten years from registration with the Maritime Industry Authority, provided that such registration is effected not later than the year 1990; Provided, That any and all amounts which would otherwise have been paid as contractor's tax shall be set aside as a separate fund, to be known as 'Shipyard Development Fund' by the contractor for the purpose of expansion, modernization and/or improvement of the contractor's own shipbuilding or ship repairing facilities; Provided, That for this purpose the contractor shall submit an annual statement of its receipts to the Maritime Industry Authority; and Provided , further , That many disbursements from such fund for any of the purposes hereinabove stated shall be subject to approval by the Maritime Industry Authority". In case a MARINA-registered enterprise withdraws from business or suspends operation, the authority of the MARINA over the incentives granted under P.D. No. 666 is provided for in the above-cited Rule X which reads: "Whenever a MARINA-registered enterprise decides to withdraw from business or suspend operations, prior written notice thereof shall be sent to MARINA. Withdrawal from business operations shall automatically cancel the certificates of registration and license to operate which shall then be turned over to the MARINA. The effect of withdrawal or suspension of operations shall, in each particular instance, be determined by the MARINA taking into account the reason thereof. The MARINA in consultation with the Ministry of Finance, may, in appropriate cases, require the refund of the incentives, in whole or in part, with or without interest or penalties". You state that several MARINA-registered shipyards closed down or temporarily ceased operations during the past two years due to bad business conditions, without the MARINA having been previously informed. Moreover, the problem was aggravated when P.D. No. 1955 was promulgated withdrawing the shipping incentives under P.D. No. 666. We do not find it necessary to make a categorization of the Shipyard Development Fund as public fund or private fund, which carries other implications not necessarily raised in issue here. Suffice it to note that the SDF represents contractor's taxes which would have been due to the government and which the latter had waived conditionally for a specific purposes only, that is, the development of the shipbuilding and ship repair industry. Access to the SDF is not a matter of right but subject to the conditions provided by law and approved by the MARINA which shall implement a system of monitoring and controlling the fund (Sec. 1, P.D. No. 666 and Secs. 1 & 2, Rule VIII of its Implementing Rules). Thus, the MARINA may order confiscation of the SDF for violation of the terms and conditions of registration (Rule IX, Sec. 2). Moreover, Rule X authorizes the MARINA in consultation with the Ministry of Finance to "require the refund of incentives, in whole or in part, with or without interest or penalties". We take this to refer to the refund of incentives granted by P.D. No. 666. One such incentive is the amount withdrawn from the SDF for the improvement and expansion of the contractor's shipbuilding or ship repair facilities. From the foregoing, it is clear that the SDF is subject to the control of the government agency vested with such authority over the funds. prcd In this connection, we find nothing in the provision of the above-quoted Rule X that would exclude from the ambit of its provisions MARINA-registered enterprises which closed down or temporarily ceased operations because of adverse economic conditions. No reference is made to any ground for the withdrawal or suspension of operations, as a condition for the application of said Rule although it provides that the MARINA shall "[take] into account the reason thereof" in each particular instance and that it may require refund "in appropriate cases". Official discretion is thus vested in the MARINA, in consultation with the Ministry of Finance. Please be guided accordingly. Very truly yours, (SGD.) ESTELITO P. MENDOZA Minister of Justice